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Bernardo Davanzati

Bernardo Davanzati books and biography

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Discourse Upon Coins

Bernardo Davanzati

Bernardo Davanzati (1529-1606), merchant, classical scholar, translator and economist. Davanzati was born in Florence where, apart from a period of residence in Lyon as a merchant, he worked until his death. His contributions to economics are contained in Notizia dei cambi (1582) which explains the operation of the foreign exchanges, and Lezione delle Monete (1588), translated into English in 1696 as A Discourse Upon Coin presumably because of its relevance to the recoinage controversies. Besides these economic writings, Davanzati produced a history of the English Reformation (1602) and a translation of Tacitus (1637) frequently described as a masterpiece of Italian literature.

Davanzati's observations on the foreign exchanges present a detailed discussion of the origins and practice of this art classified by him as the third type of mercantile transaction, the others being barter (goods for goods) and trade (goods for money). The analysis demonstrates how exchange rates fluctuate between gold points according to the supply and demand of bills, the gold points being determined by a risk premium, transport costs and interest lost while the funds are in transit. His illustration of a foreign exchange transaction by bills of exchange involving six parties residing in Lyon and Florence (1582, pp. 62-8) has been argued by De Roover (1963, p. 113) to be so instructive that had it been more thoroughly studied by historians and economists, "fewer blunders in the history of banking" would have been made.

Davanzati's lecture on coin is one of the earliest presentations of the metallist view of the origin and nature of money. He stresses the advantages of money over barter in facilitating both the division of labor and trade of "superfluities" between cities and nations. In the metallist tradition, money is defined as "Gold, Silver, or Copper, coin'd by Publick Authority at pleasure, and by the consent of Nations, made the Price and Measure of Things" (Davanzati, 1588, p. 12). Non-metallic and non-convertible money can only be made acceptable to the public through coercion. Money is therefore a human convention and its intrinsic value is small relative to its value as means of exchange. To explain this value, Davanzati presents an early quantity theory which relates the value of stocks of commodities to the world's money stock. Although he is aware of the importance of monetary circulation (he compares it to the importance of the circulation of blood in the animal body), he does not develop a concept of its velocity. The lecture on money concludes with a forceful critique of the practice of debasing the coinage, based on analyzing its consequences and illustrated with many examples of the practice. Davanzati argues that this 'evil' can only be avoided by making "Money pass according to its Intrinsick Value" (1588, p. 24). Davanzati's lecture has also been noted because of its hints at the so-called "paradox of value" and its references to elements of scarcity and usefulness in the determination of commodity prices. This and other aspects of his work were noted by Galiani (1750). Earlier his views appear to have been well received by Locke who owned, annotated and may even have inspired the Toland translation (Harrison and Laslett, 1965, p. 120).